Some firms rush to match associate raises as others watch and wait
(Reuters) - Big Law is used to moving fast when it comes to associate pay. One firm raising compensation usually sparks a wave of matches within hours.
But firms may have been more prepared than usual for the latest round of associate salary hikes. Firms padded their savings in 2020 as the coronavirus pandemic cut in-person events and travel costs. The hiring market for associates is burning hot and firms haven't raised associate starting salaries since 2018.
Milbank kicked off the round of raises last Thursday, when it increased first-year salaries $10,000 to $200,000. Davis Polk & Wardwell upped the ante Friday, setting first-year salaries at $202,500.
"This increase snuck up on us like a freight train. It was pretty easy to figure out that something like this was going to happen. We were already thinking about it," Ira Coleman, the chair of McDermott, Will & Emery, said Monday.
His firm was the first to match Milbank's scale; it confirmed Monday that it would match Davis Polk's newer scale.
Robert Bodian, the managing partner of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, said his policy committee was in a meeting when Milbank announced its new salaries. Associates and associate compensation were already on the agenda.
"We just teed that up and said, 'Look, Milbank, just came out with this, and we're talking about doing more for our associates ... let's do it,'" Bodian said Monday. "The policy committee, I would say, enthusiastically and unanimously endorsed that."
His firm matched Milbank within hours.
Legal recruiters and consultants weren't shocked by the raises, either.
Kent Zimmermann, a legal consultant at the Zeughauser Group, said in an email Monday that there's a "perfect storm" for a supply and demand imbalance that is "pushing up prices" for associates: Deal activity is hitting record highs and law firm private equity clients are busy, while tech companies are luring associates away.
Michelle Fivel, a partner at legal recruiting firm Major, Lindsey & Africa, noted Big Law associates are due for a pay raise, anyways. Cravath, Swaine & Moore raised first-year salaries from $160,000 to $180,000 in 2016, setting the New York Big Law standard. Then Milbank set a new scale in 2018, raising first-year salaries to $190,000.
"I was surprised to see (Davis Polk) come out with another $2,500," she said in an email on Monday. "I do think that will be the ceiling and I expect that most firms will match that number."
Still, several elite New York firms that traditionally lead on compensation – including Cravath; Simpson Thacher & Bartlett; and Sullivan & Cromwell – haven't matched yet.
Those three firms did not respond to requests for comment.
Firm leaders have repeatedly raised concerns about increasing compensation during the coronavirus pandemic. Dozens of firms have offered associates special bonuses as high as $64,000 since the pandemic started. Clients often took pay and budget cuts because of economic shutdowns.
Coleman said his clients "understand the differentiation of high talent ... and what it takes to keep the best and brightest."
"We haven't heard from clients on it," Bodian said. "But this is, in our view, an intentional transfer of income from the partners to the associates, not to be borne by our clients. So that we increase the comp, but we didn't increase the billing rates."
His firm's profits per equity partner jumped 33.5% to $1.88 million from 2019 to 2020, according to American Lawyer data.
Read More:
Milbank raises associate starting salaries to $200K
Surpassing Milbank, Davis Polk boosts 1st-year associate pay to $202,500
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